Finnavations LLC v. Payoneer, Inc.

Filing 22

MEMORANDUM OPINION. Signed by Judge Richard G. Andrews on 11/26/2018. Associated Cases: 1:18-cv-00444-RGA, 1:18-cv-00445-RGA(nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

FINNAVATIONS LLC,
Plaintiff,
Civil Action No. 1:18-cv-00444-RGA

V.

PAYONEER, INC.,
Defendant.

PINNAVATIONS LLC,
Plaintiff,
Civil Action No. 1:18-cv-00445-RGA

V.

STITCH LABS, INC.,
Defendant.

MEMORANDUM OPINION
Stamatios Stamoulis, STAMOULIS & WEINBLATT LLC, Wilmington, DE; Jay Johnson
(argued), KIZZIA JOHNSON, PLLC, Dallas, TX.
Attorneys for Plaintiff.
Jeremy D. Anderson, FISH & RICHARDSON, P.C., Wilmington, DE; Michael Vincent (argued)
and Ricardo Bonilla, FISH & RICHARDSON, P.C., Dallas, TX.
Attorneys for Defendant Payoneer, Inc.
Jennifer Ying, MORRIS NICHOLS ARSHT & TUNNELL LLP, Wilmington, DE; Brian B.
Michalek (argued), OLSEN & CEPURITIS, LTD, Chicago, IL.
Attorneys for Defendant Stitch Labs, Inc.
November'J6_, 2018

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Presently before the Court are Defendant Payoneer, Inc.'s and Defendant Stitch Lab,
Inc.'s Motions to Dismiss under 35 U.S.C. § 101. (C.A. 18-444, D.I. 7; C.A. 18-445, D.I. 9).
The Parties have fully briefed the issue. (C.A. 18-444, D.I. 8, 17, 18; C.A. 18-445, D.I. 10, 14,
15). I heard argument on October 24, 2018. ("Tr." (D.1. 21) 1). For the reasons set out below, I
will grant Defendants' motions.

I.

BACKGROUND

Plaintiff filed suit against Defendants on March 23, 2018 alleging infringement of U.S.
Pat. No. 9,569,755 ("'755 Patent"). (D.1. 1). The '755 Patent covers a method which
"facilitate[s] the record keeping associated with online transactions." ('755 Patent at 1: 14-15).
Claim 9 of the Patent is representative:
9. A method of delivery of transaction data to a financial management program
compnsmg:
using a network device to conduct an online financial transaction with a
commercial web server;
searching, by a financial assistant on the network device, a set of transmitted data
related to the online financial transaction;
determining, by the financial assistant on the network device, whether the
searched data comprises transaction data for the online financial
transaction;
when the searched data comprises transaction data in a first data structure
compatible with conducting the online financial transaction, copying and
storing, by the financial assistant on the network device, the transaction
data and additional transaction data not included in the transmitted
transaction data into in [sic] a second data structure compatible with the
financial management program,
wherein the second data structure differs from the first data structure.
('755 Patent, claim 9).
The specification provides some general guidance on the various instrumentalities used to
complete the method. A "commercial web server" is a commercial website such as Amazon.

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Unless otherwise noted, citations to the docket are to C.A. 18-444.

2

(Id. at 3:10-12). The "financial assistant" may be "any type of executable code." (Id. at 3:27-29).

The "network device" is a computer, pager, cellphone or "other communication device." (Id. at
3:5-8). The "financial management program" is a program like Quicken. (Id. at 3:8-10). And
the "transaction data" collected by the assistant preferably includes purchase date, product
identification, and product prices. (Id. at 2:7-10).

II.

LEGAL-STANDARD

a. 12(b)(6) Motion to Dismiss
Rule 8 requires a complainant to provide "a short and plain statement of the claim
showing that the pleader is entitled to relief .... " Fed. R. Civ. P. 8(a)(2). Rule 12(b)(6) allows
the accused party to bring a motion to dismiss the claim for failing to meet this standard. A court
may grant a Rule 12(b)(6) motion only if, accepting the well-pleaded allegations in the complaint
as true and viewing them in the light most favorable to the complainant, it concludes that those
allegations "could not raise a claim of entitlement to relief." Bell At!. Corp. v. Twombly, 550
U.S. 544, 558 (2007).

b. 35 USC§ 101 Patent Eligible Subject Matter
Section 101 of the Patent Act defines patent-eligible subject matter. It provides:
"Whoever invents or discovers any new and useful process, machine, manufacture, or
composition of matter, or any new and useful improvement thereof, may obtain a patent therefor,
subject to the conditions and requirements of this title." 35 U.S.C. § 101. The Supreme Court
recognizes three categories of subject matter that are not eligible for patents-laws of nature,
natural phenomena, and abstract ideas. Alice Corp. Pty. v. CLS Bank Int'!, 134 S. Ct. 2347, 2354
(2014). The purpose of these exceptions is to protect the "basic tools of scientific and
technological work." Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289,
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1293 (2012). "[A] process is not unpatentable simply because it contains a law of nature or a
mathematical algorithm," as "an application of a law of nature or mathematical formula to a
known structure or process may well be deserving of patent protection." Id. at 1293-94 (internal
quotation marks and emphasis omitted). In order "to transform an unpatentable law of nature
into a patent-eligible application of such a law, one must do more than simply state the law of
nature while adding the words 'apply it."' Id. at 1294 (emphasis omitted).

In Alice, the Supreme Court reaffirmed the framework laid out in Mayo "for
distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from
those that claim patent-eligible applications of those concepts." 134 S. Ct. at 2355. First, the
court must determine whether the claims are draw:n:to a patent-ineligible concept. Id. If the
answer is yes, the court must look to "the elements of the claim both individually and as an
'ordered combination"' to see if there is an '"inventive concept'-i.e., an element or
combination of elements that is 'sufficient to ensure that the patent in practice amounts to
significantly more than a patent upon the [ineligible concept] itself."' Id. (alteration in original).
"A claim that recites an abstract idea must include 'additional features' to ensure that the [claim]
is more than a drafting effort designed to monopolize the [abstract idea]." Id. at 2357. Further,
"the prohibition against patenting abstract ideas cannot be circumvented by attempting to limit
the use of [the idea] to a particular technological environment." Id. at 2358 (quoting Bilski v.
Kappas, 561 U.S. 593, 610-11 (2010)). Thus, "the mere recitation of a generic computer cannot

transform a patent-ineligible abstract idea into a patent-eligible invention." Id.
Patentability under 35 U.S.C. § 101 is a threshold legal issue. Bilski, 561 U.S. at 602.
Accordingly, the§ 101 inquiry is properly raised at the pleadings stage if it is apparent from the
face of the patent that the asserted claims are not directed to eligible subject matter. See

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Cleveland Clinic Found v. True Health Diagnostics LLC, 859 F.3d 1352, 1360 (Fed. Cir. 2017),
cert. denied, 138 S. Ct. 2621 (2018). In those situations, claim construction is not required to
conduct a Section 101 analysis. Genetic Techs. Ltd v. Merial LLC., 818 F.3d 1369, 1374 (Fed.
Cir. 2016) ("[C]laim construction is not an inviolable prerequisite to a validity determination
under§ 101.") (brackets in original, internal citations and quotations omitted). Moreover, the
Federal Circuit has held that the district court is not required to individually address claims not
asserted or identified by the non-moving party, so long as the court identifies a representative
claim and "all the claims are substantially similar and linked to the same abstract idea." Content

Extraction & Transmission LLC v. Wells Fargo Bank, Nat. Ass'n, 776 F.3d 1343, 1348 (Fed. Cir.
2014) (internal quotation marks omitted).

III.

DISCUSSION

Humans have kept accounting records for about 7000 years. 2 The '755 Patent attempts to
capture part of this practice in the area of electronic financial recordkeeping through the use of a
generic computer. The Alice step one analysis reveals that the claims of the the '755 Patent are
plainly directed at a patent ineligible concept as (1) they attempt to capture a fundamental
financial principle in violation of Alice and Bilski, and (2) they cover pure data manipulation as
proscribed by Content Extraction. The Alice step two analysis shows that the claims amount to
no more than the underlying abstract idea, rendering them patent ineligible under Section 101. 3

2

A History ofFinancial Accounting (RLE Accounting) 23 (J.R Edwards ed., 1st ed. 1989) (discussing the emergence
of accounting in Mesopotamia, Babylon, and Egypt).
_
3
Plaintiff emphasizes that the Applicant overcame a Section 101 rejection during prosecution. I have reviewed the
relevant prosecution history. (D.I. 20). I recognize that Plaintiff makes many of the same arguments now as it did
then. However, I am not persuaded that prosecution history, alone, can overcome a strong showing that a patent is
patent ineligible. In the end, "all patents must be approved by an examiner at the USPTO in order to become a
patent. The fact that [a] patent[] [was] not rejected by an examiner is not enough to support [an] argument that the
patent[] [is] directed to a patent-eligible concept." Glasswall Sols. Ltd. v. Clearswift Ltd., 2017 WL 5882415, at *5
(W.D. Wash. Nov. 29, 2017).

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A. Alice Step One
To determine patenteligibility under Section 101, I "must first determine whether the
claims at issue are directed to a patent-ineligible concept." Alice Corp., 134 S. Ct. at 2355.
Fundamental economic practices are one category of patent ineligible abstract ideas. See Bilski,
561 U.S. at 611 (hedging); Alice, 134 S. Ct. at 2356, 2357 (intermediated settlement);

CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1372-73 (Fed. Cir. 2011) (verifying
the validity of a credit card transaction); buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1354-55
(Fed. Cir. 2014) (transaction performance guaranty). Computer implemented methods directed
at collecting, analyzing, and storing data are similarly patent ineligible.
[C]ollecting information, including when limited to particular content (which does
not change its character as information), [is] within the realm of abstract ideas. In
a similar vein, . . . analyzing information by steps people go through in their
minds, or by mathematical algorithms, without more, [are] essentially mental
processes within the abstract-idea category. And ... merely presenting the results
of abstract processes of collecting and analyzing information, without more (such
as identifying a particular tool for presentation), is abstract as an ancillary part of
such collection and analysis.

Elec. Power Grp., LLC v. Alstom S.A., 830 F.3d 1350, 1353-54 (Fed. Cir. 2016) (citations
omitted).
When the generic implementation of the method claimed by the '755 Patent is stripped
away, claims 1 and 9 reduce to the following conceptual elements:
1. Making a purchase;
2. Using an assistant to search data;
3. The assistant analyzing whether the data relates to a transaction; and
4. The assistant collecting transaction data from searched data and storing it in a
different location along with other data.

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(See '755 Patent, claims 1, 9). These elements describe the concept of "bookkeeping." Just like
the patent ineligible hedging of Bilski or the intermediated settlement of Alice, bookkeeping is a
"fundamental economic practice long prevalent in our system of commerce and taught in any
introductory" accounting class. Bilski, 561 U.S. at 611. And, just like hedging and
intermediated settlement, bookkeeping is a patent ineligible abstract idea.
I further conclude that these conceptual elements amount to no more than the abstract
idea of using a generic computer to search, analyze, and store information. The Federal Circuit
has repeatedly found claims directed at collection and manipulation of data to be patent
ineligible. See Elec. Power Grp., LLC, 830 F.3d at 1353-54 (collecting cases). In particular, the
'755 Patent is remarkably like the patent invalidated in Content Extraction. The Content

Extraction patent related to extracting and storing financial data related to a transaction. 776
F.2d at 1345-46. Applying Alice step one, the Federal Circuit found that "the claims of the
asserted patents are drawn to the abstract idea of ( 1) collecting data, (2) recognizing certain data
within the collected data set, and (3) storing that recognized data in a memory." Id at 1347. As
in Content Extraction, the '755 Patent's attempt to claim bookkeeping relies on the recognized
abstract concept of data collection and recognition. (See, e.g., '755 Patent, claim 9) ("searching .
. . a set of transmitted data" and "determining ... whether the searched data comprises
transaction data"). Accordingly, I conclude that the '755 Patent's claims, which amount to no
more than data manipulation, are patent ineligible.
Plaintiff argues, without much explanation, that DDR Holdings, LLC v. Hotels.com, 773
F.3d 1245 (Fed. Cir. 2014), and Enfish, LLC v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016),
support the patent eligibility of the claims. (D.I. 17 at 9-13; Tr. at 36). Plaintiffs reliance on
these cases is misplaced. The claims in DDR Holdings covered a system which prevents website

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visitors from being taken to another website by clicking on a hyperlink. 773 F.3d at 1257.
Unlike the claims of the '755 Patent, the DDR Holdings invention was "necessarily rooted in
computer technology in order to overcome a problem specifically arising in the realm of
compute! networks." Id. That is, the DDR Holdings invention did not exist outside of the realm
of online activity-a visitor to a brick-and-mortar store cannot be transported via the click of a
button to a different store. In contrast, the Applicant explained during prosecution that the '755
Patent focuses solely on the real-world problems of manual data entry. (See D.I. 20-1,
Amendment B at 8) .
. The Federal Circuit found the Enfish claims patent-eligible because "the self-referential
table recited in the claims ... [was] a specific type of data structure designed to improve the way
a computer stores and retrieves data in memory." Enfish, 822 F.3d at 1339. In other words, the
Enfish claims were directed to "a specific improvement to the way computers operate." Id. at

1336. The '755 Patent claims, however, provide no specific improvements to computer
operation They merely invoke a computer with standard computer functionality to produce a
result.
The '755 Patent does not address a problem unique to computer technology. Nor does it
announce an improvement in computer operation. Thus, DDR Holdings and Enfish do not
contradict my finding that the claims are directed at patent ineligible subject matter.
B. Alice Step Two

Claims 1 and 9 of the '755 Patent recite performing an abstract idea using conventional
computer functions: running a program, searching information, copying information, translating
information, and transmitting information. These steps are "basic functions of a computer" and
fail to transform the claims into patent eligible subject matter. See Alice, 134 S. Ct. at 2359-60.
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Courts have consistently found such functions are not inventive. In Alice, for example,
the Supreme Court held that claims reciting a "data processing system" with a "communications
controller" for obtaining, modifying, and transmitting data was not inventive. Id Similarly, the
Federal Circuit has held basic computer functions to be insufficient to confer eligibility. See,

e.g., Intellectual Ventures I LLC v. Capital One Bank (USA), 792 F.3d 1363, 1367-71 (Fed. Cir.
2015).
Even when the basic functions called for in the '755 Patent are considered "as an ordered
combination," they do not reveal a "non-conventional and non-generic arrangement of known,
conventional pieces" that might provide an inventive concept. Bascom Global Internet Servs.,

Inc. v. AT&T Mobility LLC, 827 F.3d 1341, 1350 (Fed. Cir. 2016). Unlike the improvements to
computer technology that the Federal Circuit has found eligible at Alice step two, the claims here
merely apply an "old solution" (bookkeeping) in a computer environment without specifying any
non-conventional way to accomplish or practice the idea.
The predominant software functionality claimed in the '755 Patent-recording financial
data-is identical to the function found to be non-inventive by the Supreme Court in Alice. In
fact, the Alice court stated that electronic recordkeeping, such as electronic bookkeeping, is "one
of the most basic functions of a computer." Alice, 134 S. Ct. at 2359. Further, the Alice court
held that computer functionality "to obtain data, adjust account balances, and issue automated
instructions" was well-understood, routine and conventional activity previously known to the
industry. Id The '755 Patent recites the same electronic recordkeeping and data collection
functionality as the patent at issue in Alice. Thus, it fails to supply an inventive concept.
IV.

CONCLUSION

Claims I and 9 of the '755 Patent are directed to patent ineligible subject matter and do
not contain an inventive concept. Plaintiff does not argue that the dependent claims supply
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additional elements that might render them patent eligible. In fact, Plaintiff agrees that Claim 9
is representative. (Tr. at 29:3-5). Thus, because each of the claims of the '755 Patent are
directed to unpatentable subject matter under 35 U.S.C. §101, Finnavations's Complaints fail to
state a claim upon which relief can be granted. I will grant Defendants' motions to dismiss with
prejudice.

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